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Indosat teams up with Softbank for $50 million venture fund

The fund targets internet startups with services like e-commerce and electronic payments.

JAKARTA - Indosat, Indonesia's third biggest telecommunications operator by subscriber base, has launched a $50 million investment fund with Japanese telecom company Softbank. The fund will target Indonesian Internet startups.

     The SB ISAT fund will operate for 10 years. Besides the two telecoms, a number of domestic and global investors, including an Indonesian venture capital firm, have invested in the vehicle. Details of the value of investments were not made public, but a spokesman for Indosat said Softbank will play a leading role in managing the fund, while Indosat will use its domestic network to pick potential investment targets.

     Indosat is mainly eyeing on tech startups that offer services on cellphones such as e-commerce, electronic payments and advertising. It will focus on "growth-stage" companies -- those that have survived the early stages and are seeking funding to establish their businesses. The size of the investment will depend on the deal.

     Indosat is the first among major Indonesian telecoms to begin the hunt for promising domestic startups, amid rising demand for Internet based services. According to the Indonesian Internet Service Providers Association, Internet users in the country are projected to reach 100 million this year. Indosat says 75% of them access the Internet through their cellphones.

     This trend has made data fees an increasingly important source of revenue for telecoms. But Indosat has lagged behind competitors in adding new subscribers, resulting in a decline in revenue for the January to March period. By injecting its services into the startup infrastructure, Indosat aims to get ahead of its rivals in growing a corporate customer base.

     Softbank established its reputation as an investment vehicle with a stake in Alibaba, the Chinese e-commerce company that recently filed an initial public offering in the U.S. that values the company at $100 billion. Softbank has already made investments in Indonesian companies including Tokopedia, an e-commerce firm, through its Korean affiliate. The company hopes Indosat will offer a bigger and more diverse portfolio of startups, increasing its chances of raising high returns after the investments have grown in value.

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